Saturday, March 18, 2017

RuPay is India’s home grown card scheme, brought to reality by the National Payment Corporation of India. Founded on March 26, 2012 it competes with the likes of Visa and MasterCard. Currently RuPay has a market share of around 35%, making it the second largest card scheme in terms of numbers (Visa has over 50% of the cards in the market). In this post I will be discussing about RuPay cards.

RuPay

The name has come from two words Rupee and Payment. The three colors orange, green and blue with a white background speaks for itself (Colors of the Indian National Flag).

RuPay Logo

Orange and green in the logo shows that the nation is moving towards growth supported by a fast paced service to the growing nation. Blue indicates trust, peace and security which the people get as a feeling when they own this card.

NPCI

National Payments Corporation of India was formed in December 2008 and promoted by

As RuPay cards is completing three years in the Indian Market, it is necessary to know what made National Payments Corporation of India to start RuPay cards.

Near Duopoly by Visa and MasterCard: – The two giants have dominated the electronic payment market in India. Over 95% of the transactions in India were done over these gateways.

Visa and MasterCards issued in India

Non-Issuance of ATM cards by small and co-operative banks: – As Visa and MasterCard charge exorbitant fees from the banks as joining fees, most banks did not find it viable to invest a huge sum to provide ATM services.

Charge from the customers: – Some retail outlets, charge around 2% per transaction from their customers as outlet owners find it difficult to make their business viable by paying huge transaction fees.

Motivated by China’s Union Pay and Japan’s JCB: – These are two payment gateways run by their respective governments, have helped them achieve their goals with their sincere efforts. China’s Union Pay is the world’s second largest payment scheme in terms of transaction value.

To serve the RBI’s vision to provide a domestic, open loop and multilateral system in electronic payments to all banks and financial institutions in India.

Benefits of RuPay Cards

Low transaction costs: Transaction through RuPay is 90 paisa per transaction irrespective of the value of the transaction. This fee is charged collectively from the merchant’s bank account and card issuer’s bank. Visa and MasterCard charge around 2% per transaction.

No Joining fees: Unlike Visa and MasterCard, RuPay doesn’t charge a single penny for joining the RuPay Payment Scheme.

Quicker transactions: As the transactions are done locally, the settlement process is faster than its rivals.

Data: Customer information is not let out to other countries as the data is secured in India locally.

EMV: This stands for Euro Pay, MasterCard and Visa which have set up standards to provide high class secured chip based cards. RuPay has partnered with Discover Financial Services (DFS) to provide EMV based RuPay cards. These cards demand a pin for completing the transaction at every Point-Of-Sale (POS).

Partners

A partnership was struck between Discover Financial Services (DFS) and National Payments Corporation of India (NPCI) such that Discover and Diners Club cards are accepted in all NFS ATMs in India and RuPay Global cards would be accepted for international purchases and cash transaction at Discover, Diners Club and PULSE network across all POS terminals worldwide. (They have over 25 million merchants worldwide in almost all nations in the world).

NPCI has partnered with Acculynk to provide secure encryption and authenticated consumer PIN for all its customers for e-Commerce purchases under the brand RuPay PaySecure.

Indian Railway Catering and Tourism Corporation (IRCTC) has partnered with Union Bank of India (UBI) and NPCI to book tickets and other services using RuPay prepaid cards which have a top-up limit of Rs. 50,000.

IRCTC has partnered with UBI to launch RuPay Prepaid Cards

Japan Credit Bureau International (JCBI) and NPCI have entered into an alliance in which JCB cards would be accepted at all POS terminals and NFS ATMs in India in return for which the NPCI member banks can issue RuPay/JCB cards which would be accepted at all POS terminals in the JCB network worldwide.

China’s Union Pay and NPCI have struck a deal such that CUP cards will be used at all RuPay POS terminals in India.

Partnership of NPCI with Oxigen group to launch OxiCash Money Transfer which makes Oxigen Wallet India’s First Non-banked Mobile Wallet to provide Instant Money Transfer Service without hassles.

Pradhan Mantri Jan-Dhan Yojana and RuPay

Shri Narendra Damordas Modi, on his first Independence Day speech declared scheme for bringing about financial inclusion in India by bringing the un-banked population in the banking ecosystem. Features what an account holder would receive

RuPay Payment Scheme benefitted the most from this scheme. The adoption of RuPay cards increased drastically in India making it the second largest Payment Card in India with around 35% market share. Over 25% of the transaction in India is done using RuPay cards across ATMs, POS terminals and e-Commerce Platforms.

Ø The duo-poly in India is now a story of the old. Now there are three significant players in the payment card market, namely Visa, MasterCard and RuPay in India.

Ø It has 18 prepaid instruments on board who issue RuPay prepaid cards.

Ø RuPay cards are issued by 27 Public Sector Banks, 13 Private Banks and over 250 Co-operative & Gramin Banks. RuPay was a boon to the co-operative banks and its customers due to minimal cost in issuing RuPay cards.

Ø It has won many laurels for itself like “Renaissance Skoch Award” for building country’s own and the fastest adopted card system in the world.

Ø It has broken all records by building a payment gateway in less time, whereas it usually takes around five years to make a fully functional payment system.

Ø It has partnered with Kochi Metro to provide RuPay card services at all its station in the metro network.

Ø RuPay debit cards were issued by the Punjab Government to all commission agents for quicker payments through the ‘Kisan Arthia Information and Remittance Online Network’.

Ø RuPay prepaid cards were issued to AMUL farmers under the brand ‘Kotak Samriddhi’ for direct transfer for their daily produce.

Sunday, February 26, 2017

This time, it’s a QR (quick response) code-based payment solution that will allow merchants to accept digital payments from those who hold a debit card even if they don’t have a card swiping terminal. The product, called BharatQR, has been jointly developed by Mastercard Inc., Visa Inc. and Rupay. It will be formally launched on Monday in Mumbai.

It becomes the second major digital payment option being promoted by the government after the Unified Payments Interface (UPI) based BHIM app. Both are being pitched as an alternative to cash following the November 8 demonetisation decision. While currency availability has now started to normalise, the government is trying to encourage digital payments by making them more convenient and cost effective.

How QR Code-Based Payments Work

A QR code-based payment system works on the existing network of card companies like Mastercard, Visa and Rupay. This means that anyone holding a debit card from any of these providers can pay using a QR code, provided they have downloaded an app from their bank which supports this payment option.

If a customer has the app and wants to make a payment at a merchant who doesn’t have a card swiping machines, he can simply scan the merchant’s QR code and transfer the money directly from the bank account.

Private payment firms like Paytm already offer this facility, but both parties need to have a Paytm account to use it.

BharatQR attempts to overcome this limitation by allowing people to pay without having to choose one payment network over another. This will, however, need a large number of bank apps to support such payments.

QR-based payments have an added advantage of being infrastructure-light. This means that a merchant doesn’t require a lot of equipment to accept digital payments, which reduces costs.

Such a payment system has the potential for take off as it falls under the digital point-of-sale solution segment, for which the Reserve Bank of India (RBI) recently proposed lower merchant discount rates in its draft circular.

Moreover, penetration of card payment infrastructure in India is abysmally low. As of October 2015, there were only 12 lakh point of sale terminals in the country and there are only 6.7 card transactions per capita, much lower than Russia’s 47 and Brazil’s 55, according to a March 11 report by the National Payments Corporation of India and JM Financial Ltd.

A Crowded Payment Ecosystem

The launch of BharatQR will add to an already crowded market for digital payments. There are at least a dozen non-cash payment mediums out there including UPI, mobile wallets, net banking, debit cards and soon-t- be-launched Aadhaar Pay, among others. Individual firms like Paytm also have their own QR- and non-QR-based payment products.

Not all such products have worked.

For instance, Mastercard had launched a QR-code pased payment system in November 2016 called Masterpass. This product, however, remained limited in its reach as it was launched with a tie-up with only RBL Bank. Mastercard will now work with the government to develop BharatQR, which is a wider cross-platform product, Murali Nair, senior vice-president for market development-South Asia at Mastercard, told BloombergQuint in a response to an email on January 23.

About 190 million, or one in three of the total 580 million debit cards currently in use in India are RuPay cards.

Clearly, the Pradhan Mantri Jan Dhan Yojana (PMJDY) have given a head-start to a one-year-old card system that now stands almost shoulder-to-shoulder with global peers such as Visa and MasterCard in India, at least in user volume. And it has its own advantages (see graphic).

Modi launched the Jan Dhan scheme in August last year, with the promise to end “financial untouchability”.

So far, more than 175 million accounts, which come with a RuPay debit card and an overdraft facility of Rs 5,000, have been opened under the scheme.

Already 154 million RuPay cards have been issued to these new non-frills account holders. Banks have also issued another 40 million RuPay debit cards to “non-Jan Dhan” customers.

“We are now focussing outside the PMJDY and promoting these RuPay cards even to other savings account holders,” AP Hota, MD and CEO, National Payments Corporation of India (NPCI), which runs RuPay, told HT. “Until one year ago MasterCard and Visa Card were predominant in the market while now RuPay has made a mark and we are hoping to increase its presence further.”MasterCard said Indians are fast adopting digital payment technologies. “There is plenty of room to grow in this segment,” said Vikas Varma, executive director, South Asia, MasterCard.

“Low personal consumption expenditure penetration presents a significant opportunity for electronic payments growth, in line with the government’s less- cash society vision,” said TR Ramachandran, group country manager, India and South Asia, Visa.

For RuPay, which the RBI first conceptualised in a vision paper in 2009, making it more acceptable in retail merchandise and e-commerce transactions, and globally remain key challenges.

China has a similar card called the Union Pay of China.

Indian Railway Catering and Tourism Corporation (IRCTC), billed as India’s biggest e-commerce site, has launched a RuPay pre-paid card that allows railway passengers to book tickets, shop and pay service bills.

NPCI has tied up with Discover Financial Services and Japanese card network JCB for international acceptance of its cards.

Wednesday, September 24, 2014

We have seen a lot of MasterCard and Visa. It is time now to switch
over to a card scheme which is more Indian. It looks like that India is
now ready to welcome its very own card and payment scheme named as
RuPay.

RuPay is going to be an Indian venture into the world of card
schemes. However, before you jump the guns, you should know that
although RuPay is India’s brainchild, it is not hundred percent Indian.
RuPay cards are being created in affiliation with Discover Financial
Services, which as we all know, is a US based financial company.
Nonetheless, RuPay is going to be more Indian than American.

How to apply for RuPay card?

Many public banks of India have already started offering the RuPay
card to the consumers. Therefore, if you want to get the RuPay card you
can ask your bank for it. The application process is pretty simple depending upon the bank.

While most of the private banks issue the debit cards over the phone
after verifying your identity (by asking the TPIN number), the
government or public banks require you to fill the form and follow a
process to get the new debit card. You can call up your bank and ask about the process to get the RuPay card issued.

Not many private banks are offering the RuPay cards at this time but
it is expected that it will be available soon with all of them. The
Reserve Bank of India has mandated RuPay card for all the banks but they have been given some time to get it incorporated in their systems.
If you are an existing customer of the bank which already offers the RuPay card then you can apply for a new debit card. If you are opening a new bank account then at the time of depositing the money you can ask the bank to issue the RuPay card.

Will MasterCard and Visa cards be phased out?

No. Reserve Bank of India has no such plans to phase out the existing and popular Master and Visa cards. In fact, the users of these cards will be able to continue using these cards as they have done before.

With the introduction of RuPay card, there will be a tough
competition for these financial giants though. You will be able to use
your existing debit cards at all the ATM machines and for online shopping as you used to do it before.

What are the benefits of RuPay card?
There are several benefits of using the RuPay card for the Indians. Since Master and Visa cards
are provided by the foreign financial institutions the transaction
costs are higher. With RuPay cards, the cost of transaction will be
lesser because it will happen within India involving no international
processing. People will also enjoy bigger savings due to the low
transaction fees.

However, there are certain disadvantages too. For instance, while Master and Visa cards offer the reward points 1on every purchase, there is no such thing with the RuPay cards.

Monday, July 7, 2014

In the month of May, President Pranab Mukherjee inaugurated RuPay,
which is India’s first national payment gateway. Created by National
Payments Corporation of India, RuPay has several advantages compared to
private payment gateways such as low processing fees, data security and
more.

While reporting this exciting news,
to be very honest, we were quite skeptical regarding it’s adaptability
and wide scale usage. Considering that it is a government owned and
supported payment gateway, we assumed that it will take some time to
spread and adapt.
But we were very wrong!

In a latest development, government is actively encouraging the usage
of RuPay across everywhere, as they want it’s adoption to grow quickly.
Such is the intensity of it’s promotion that for the first time in
their 30 years of existence, global payment gateway biggies such as MasterCard and Visa are facing the heat.

As per reports
coming in, Gurdial Singh Sandhu, secretary at the finance ministry’s
department of financial services has asked all nationalized banks to issue debit cards which are RuPay enabled!

Normally, only one debit card is issued per account, but this time,
bank officials have been categorically asked to tweak their rules, and
issue one more RuPay enabled debit card which can use this new payment
gateway.

Not only this, merchant establishments and traders have been
specifically requested and encouraged to install sale terminals
especially for RuPay enabled debit cards so that a wide scale adaption
of India’s new payment gateway is made possible.

Industry experts are fearing that such official diktat from the
government to nationalized banks can defer some customers to private
banks as they are still using MasterCard or Visa payment gateways.
But AP Hota, MD & CEO of National Payments Corporation of India
has rubbished such
apprehensions as he said, “Such fears are unfounded.
RuPay is a fully functional card payment system. We are also launching
Platinum cards for HNI customers.”

Nationalized banks have now been given 6 months to issue a new RuPay
enabled debit card to all it’s existing customers, inform and educate
all bank employees in thousands of branches all over India and send an
updated report to the government regarding the adaptation and usage.

Just for information, around 2 crore RuPay enabled debit cards have been issued so far.
Last year, Indians spend Rs 80,000 crore using debit cards, and its
usage is increasing at an impressive rate of 35% every year. It seems
that Indian Government has donned the cap of a startup this time, and is
doing everything possible to increase RuPay’s usage. If the same
momentum is maintained for another year or so, RuPay can easily capture
more than 80% of the market in India, and this is a bad news for private
payment gateways.

What is your opinion on the increased effort of Indian government to
spread the usage of RuPay? Will it backfire or will it work?

For the first time in their 30-year existence, Visa and MasterCard,
the world's largest payment companies, are facing the heat in India.
Lending its weight behind the local card scheme, RuPay, the government
has asked state-owned banks to issue RuPay debit cards to customers.

In a communique to banks last week, Gurdial Singh Sandhu, secretary at
the finance ministry's department of financial services, "urged" CEOs of
public sector banks to issue RuPay cards to all existing customers who
do not have debit cards as well as to new clients. Banks have also been
told to "encourage" merchant establishments to install point of sale
terminals for RuPay cards, two banking sources told ET.

While banks have not been instructed to refrain from issuing cards
where transactions are processed by Visa or MasterCard, there is a clear
direction to promote RuPay. Customers are typically issued a single
debit card per account and banks will have to pursue the unconventional
practice and possibly tweak systems to issue two debit cards to a client
who insists on a Visa or MasterCard that currently have greater
acceptance than RuPay.

RuPay was launched by National Payments
Corp of India (NPCI), set up to function as a cost-effective payment
services entity. Responding to ET's query on whether PSU banks could
lose rich and more brand-conscious customers to private banks (which
have not received a similar direction from the finance ministry), AP
Hota, MD & CEO of NPCI, said, "Such fears are unfounded. RuPay is a
fully functional card payment system. We are also launching Platinum
cards for HNI customers."

"I'm not aware of the ministry's communication to banks. But as I
understand, the government's focus is to promote financial inclusion,"
said Hota of NPCI.

For banks, it's a mandate they will have to
fulfil. Within the next six months they will have to offer the new debit
card to existing customers, inform thousands of branches and submit
progress report to the ministry every quarter.

It's not unusual
for countries and governments to support local retail payment networks
that offer the software backbone and process card transactions.
Countries such as Singapore and Brazil have their local payment
companies while China disallows foreign payment firms to process
domestic card transactions. But industry sources said an absence of a
level playing field may worry global players such as Visa and
MasterCard.

For MNC payment firms, the stakes are high. Every
year around Rs 80,000 crore worth of debit card spends happen in India,
of which 5% are cross-border transactions. It's a market that's growing
at close to 35% annually. Credit card transactions, growing at over 25%,
are more than two times debit card spends.

Asked whether RuPay
would be accepted for transactions such as buying books and music on
international e-commerce sites, Hota said NPCI was tying up with the US
firm Discover Financial Services to promote co-branded cards to
facilitate international transactions.

The
fledging card scheme is trying to spread its footprint. So far,A 20
million cards have been issued. "It has full acceptance in ATMs, and of
the 10.35 lakh POS (point of sale) terminals in the country, RuPay can
be accepted in 9.87 lakh terminals. About 95% of debit card transactions
are domestic in nature," said SK Gupta, chief project officer, RuPay.
But not all merchant establishments are familiar with RuPay and few
display RuPay stickers (along with Visa and MasterCard) on their
counters. Till now, POS transactions worth Rs 40 crore have happened
through RuPay.

Tuesday, May 27, 2014

Will Rupay become the Indian ultimatum posing a threat to global sharks like MasterCard & Visa?
The current online trasaction system does not allow the participation
of all Indian banks & financial institutions in electronic
payments.All we yearned for was a open loop,super-secure, multi-lateral
sytem which would offer this inclusion. Kudos our very own Rupay...it
offer much more!

Working towards enhancing the payment ecosystem in our country,Rupay is
all set to support issuance of debit and prepaid cards by over 250
banks ,150 cooperative banks and Regional Rural Banks (RRBs) in
India.RuPay functions across three channels i.e ATMs, Point of Sales
(POS) and online payments.

Security
Enhanced security measures are in place in addition to the RBI mandated
2-Factor authentication viz. registration, OTP, image based
authentication and anti-phishing measures .Further the bank themed PIN
pad shuffles as & when a digit is entered as an additional security
measure.

Contactless
The efficiency of our innovative contactless payment option can be increased by employing Rupay.

Why Rupay Poses a threat to Visa & MasterCard?

Lower cost and affordability :
Due to its domesticity, the cost of clearing and settlement would be
lower This would make the transaction costs affordable & drive
increased usage of Rupay cards.

Customized product offering :
RuPay, being a domestic scheme is committed towards development of
customized product and service offerings for Indian consumers.

Right pricing-Untapped consumer segment :
Our untapped rural consumers market who do not have access to banking
and financial services can be tapped into through Rupay's right pricing.
RuPay cards are more economically feasible for banks to offer to their
customers. Relevant product variants such as Milk Card, Kisan Card&
IRCTC cards would ensure that banks target the unexplored consumer
segments.

Inter-operability between payment channels and products :
RuPay card is uniquely positioned to offer complete inter-operability
between various payments channels and products. NPCI currently offers
varied solutions across platforms including ATMs, mobile technology,
cheques etc and is extremely well placed in nurturing RuPay cards across
these platforms.

Truely Unique
Personal accident insurance and permanent disability cover of Rs one
lakh is given to the cardholder.This unique feature is not available
with any of the international cards Visa & MasterCard!

Sunday, February 9, 2014

The National Payment Corporation (NPCI) plans to almost
double the number of RuPay Cards, the homegrown rival to Visa and
MasterCard, to 25 million over the next two months.

“We
have so far issued 14 million RuPay cards, and this will touch 25
million by the end of March,” NPCI Managing Director and Chief Executive
Abhay P Hota said. NPCI is the nodal agency under the Reserve Bank
that manages the national payment switch and has developed the RuPay
Cards.

RuPay Card, Reserve Bank and domestic lenders-promoted
NPCI’s answer to Visa and the MasterCards which control the domestic
plastic money market, was launched in April 2012.

It has seen as many as 210 banks, including all public
sector banks and some of the leading private sector ones, issuing these
domestic debit cards, Hota said. He agreed, however, that most RuPay
customers are urban cooperative banks and regional rural banks.

He
also said Citi and HSBC will join RuPay system by July. “Today our
cards are accepted on all ATMs (1.45 lakh), 8.4 lakh merchant terminals
and 70 per cent of the e-commerce merchants,” he said.

About the
quick acceptance, he said, for all the stakeholders it makes immense
business sense as NPCI charges just 90 paise as the fee per transaction —
60 paise from the merchant and 30 paise from the issuing bank — with
the same kind of security; the same on a Visa or MasterCard is as high
as Rs 4.

“Our switching fee is only 60 paise for acquiring banks and 30 paise for
issuing banks per transaction,” Hota said. On profitability, Hota said,
“We will break even by the end of the seventh year (2018-19).”

Hota
ruled out entering credit cards business as of now but was confident of
traction in the international debit cards. Till now, Bank of Baroda,
Central Bank of India and Saraswat Bank have issued RuPay international
debit cards, being offered with the California-based Discover Financial
Services.

Nearly nine years after becoming a full-fledged commercial bank, IDBI Bank has decided to issue credit cards to its customers.

The Mumbai-headquartered bank intends to issue around five lakh cards in
three years — one lakh in the first year and two lakh cards each in the
following two years.

The public sector bank, which currently has a base of more than 10
million customers, will be issuing EMV (Europay, MasterCard and Visa)
chip cards with magnetic stripes.

EMV is a global security standard for microprocessor chip card
technology. This ensures that the credit card is not only accepted
anywhere in the world but is also better protected against fraudulent
activities.

Since many merchant establishments in the country still have credit card
payment infrastructure (terminals) that accept cards with magnetic
stripe, the bank has decided to issue EMV cards with magnetic stripe.

The category of credit cards that the bank plans to issue are: Platinum, Signature and Corporate.

Service provider

For foraying into the credit cards space, IDBI Bank is planning to
engage the services of a third party service (TPS) provider for
providing end-to-end solutions for credit card issuance under the
outsourced model. The TPS provider, among others, will undertake
operational activities relating to account updation, demographic
changes, payment instructions, recurrent payment instructions and
balance transfer request received through physical change request
form/phone banking/Net banking.

For now, IDBI Bank will be issuing credit cards on Visa and MasterCard
platforms. The main business of Visa Inc and MasterCard Worldwide is to
facilitate electronic funds transfer — they process payments between the
banks of merchants and the card issuing banks of the purchasers.

Despite FX headwinds, Visa
(NYSE:V) reported strong results for the first fiscal quarter of 2013
with a 9% increase in net income and an 11% growth in revenues. The
total nominal payments volume growth rate fell from 9.6% in the
September quarter to 8.2%. This can largely be attributed to currency
fluctuations, as the U.S. dollar strengthened against currencies in
Asia, Latin America and Canada, and the growth rates for these regions
fell. In Asia, which accounts for more than 40% of volume outside the
U.S., the nominal growth rate was 7.9%, despite a 13.8% increase on a
constant dollar basis. Visa Europe is a wholly separate company to Visa
Inc. and the latter did not benefit from the strengthening of the Euro
during the quarter. Going forward, the company expects a negative impact
of 2% on volume growth, and has issued an FX-adjusted guidance of 8% to
11% growth through the coming quarters.

The worrying sign for Visa was a 2% decline in the constant dollar
growth rate, which was still healthy at 11.4% but lower than prior
quarters. Despite a 3.8% increase in holiday season retail sales that
allowed competitor American Express (NYSE:AXP) to maintain a 9% growth rate in card-member spending, Visa observed a 2% decline in its U.S. volume growth rate.The rate fell to from 10.3% during the September quarter to 8.3%. This
might have been due to adverse weather conditions in the country, which
led to a 15% decline in customer traffic through November and December.
Visa was not able to fully capitalize on the e-commerce phenomenon,
which saw a 9.3% increase in total online sales through the December
quarter. The company’s payment volume per transaction fell from $58 in
the September quarter to $51 during the last quarter. Our price estimate
of $191 for Visa’s stock implies a discount of 15% to the current market price.

U.S. Growth Rate Dependent On Consumer Sentiments
Electronic payment penetration in the U.S. is quite high; more than
60% of personal consumption expenditures (PCE) in the country are
through non-cash transactions. This indicates that future growth won’t
come from increased penetration but is dependent on consumer sentiments.
Trends in this regards are positive. Recent figures released by the
U.S. Department of Commerce show that Americans are now more inclined to
spend; personal saving as a percentage of disposable personal income
has gone down from 6.6% in the fourth quarter of 2012 to 4.9%.
Economic improvements in the country saw the unemployment level fall
below 7% in December while wages and salaries increased 4% over the
prior year.
Visa is the dominant card processing company in the U.S.; the company
has a high level of merchant acceptance in the country, with over 88
acceptance locations per 1,000 urban households, and accounts for 22% of
the personal consumption expenditures (PCE) in the country. ((Personal Consumption Expenditures,
U.S. Department of Commerce: Bureau of Economic Analysis)) We believe
that Visa can maintain a stable growth rate of around 8% to 9% in the
coming years in the U.S.

Expansion In Emerging Markets Will Lead To Higher Growth
The expansion of financial services in emerging markets in Asia and
Latin America will allow Visa to achieve higher penetration in some key
countries. More than 60% of transaction in countries like India, Mexico,
Brazil, Russia, Indonesia, South Africa and UAE are still cash-based,
but banks are rapidly expanding their network and issuing cards bearing
the Visa logo. PCE growth rate has been around 10% in these countries
for the last 4 years, underlining the potential. We believe that
international expansion might be hindered by currency fluctuations in
the short term, but long term prospects are good for Visa. During the
December quarter, the company reported a 13.8% increase in Asia Pacific
payments volume on a constant dollar basis but the nominal growth was
7.9%. In Latin America, the growth rate was 16% on a constant dollar
basis but just 5.6% on a nominal basis.

Visa has around 700 million cards in Asia, almost the same number as
in the U.S. However, the average number of transactions per card is just
5 per quarter as opposed to 17 for the U.S. Since the total population
of the Asia-Pacific region is much higher than the U.S., we expect the
number of cards to increase at a high rate in the coming years. Increase
penetration and the growth of the e-commerce and m-commerce phenomenon
will also lead to greater use of these cards in the region.

Tuesday, November 5, 2013

While Visa and Mastercard
slug it out for leadership, analysts say RuPay has the potential to
cause disruption and eat into their market share.

Conventional wisdom says customers in India couldn't care less
whether they have a Visa, Mastercard, or RuPay in their wallets as
credit and debit cards are known more by the issuing banks than the card
company. But the three big card brands obviously think otherwise.

While Visa continues to be the larger player in terms of market
share, MasterCard is slowly, but surely, bridging the gap by offering
additional features on the card.

So how do customers choose between a Visa or MasterCard? According to
Nitish Asthana, Executive Director, First Data, ICICI Merchant
Services, the affinity of the customer to the issuing bank plays an
important role along with the credit limit, simplified applications
process, offers, rewards and the reputation of service.

"Visa and MasterCard are well entrenched brands and widely accepted
across all merchant outlets and e-commerce websites," he says.

Akhilesh Tuteja, partner and national head, IT Advisory, KPMG India
says that both Mastercard and Visa enjoy similar brand value, though
Visa is perceived to be a more popular brand than Mastercard because
Visa has an aggressive marketing strategy and is seen more often.

"To the end customer, it does not matter whether they hold a Visa
card or one from Mastercard because both are accepted at most and
similar merchant establishments. Offers and reward points are the other
important features of a card. However, these are mostly bank initiated
and rarely payment gateway initiated," he says.

Visa is the first card that banks always start their card business
with, says Uttam Nayak, Group Country Manager for India and South Asia,
Visa. "We are leaders because from a bank's perspective our products are
simple and easy to use. Our implementation and execution is robust and
we have a developed a template for launches. We know what kind of
operating process and IT infrastructure is required, how to write a
policy document and our cards are easy to test at POS and ATMs", Nayak
says.

If Visa was the first to offer Aadhar as an identity solution for
e-KYC, MasterCard is not too far behind and is in the process of
launching its own Aadhar linked solution, says Ari Sarker, Division
President, South Asia. The gap between Visa and MasterCard is narrowing,
he insists.

His claim is borne out by Hari Shenoy, Digital Marketing, brand-comm,
who says, Visa leads as far as size is concerned, whilst MasterCard is
reportedly accepted in more countries. Visa's network used to be larger
previously, but now MasterCard's network is on par. When compared to
advantages that a brand like Visa could have, it is increasingly getting
narrowed.

Recognizing this, Visa has associations with Olympics and FIFA
globally, since these bodies symbolise highest quality of skill sets,
points out Nayak. In local markets, the association is with local
properties. For instance, in India, Visa tied up with Sachin Tendulkar,
way back in 1996.

"From a consumer's perspective, we have tie-ups that are relevant to
them. The tie-up with Cafe Coffee Day to offer discounts at airport
lounges for Infinite card holders and 10 per cent cash back for frequent
flyers are some instance of this. Currently we are working on a
platform for bill payments because people have to pay bills," Nayak
says.

MasterCard is working on a contact-less card and a pilot project is
expected to be launched late this year or early next year, Sarker says.

Apart from convenience and tie-ups, security is another area of
concern for customers while choosing the card and both players are aware
of this. Both of them offer the 'Zero-liability feature' in their
cards, where in if the card is stolen or misplaced, the cardholder is
not liable to pay for any transaction made on the card. "We realise that
fraud is a big concern and we put customer at the centre of
everything," Visa's Nayak says.
Another feature that Visa has introduced is Visa Risk Manager, which
was introduced in 2011. This identifies a transaction that is not
typical of the customers' transaction and blocks it. On its part,
MasterCard has a similar feature, called MasterCard inControl. The
technology allows cardholders to determine how, when and where a card
may be used. Issuers can deliver real time information to cardholders
and establish controls.

According to KPMG's Tuteja, Visa scores on dispute resolution because
the process smoother. This also shows that Visa has made better
investments in their back-end support system than Mastercard.
Queering the pitch for them could be RuPay, which has recently
entered the e-commerce space and is part of the payment gateway options,
making analysts bullish on its prospects. Shenoy agrees that RuPay has
the potential to cause disruption and eat into Visa and MasterCard's
market share. "Many nationalised banks, cooperative banks and a few
private banks are part of the RuPay network. It has a lower transaction
fees that will benefit banks as well", he says.

Loyalty programs will be key and will drive stickiness to merchants
and banks alike. Customers are expected to seek value on the transaction
experience, with features such as secure wallet and time of the
transaction on the internet gaining more prominence in the decision.

SLUGGING IT OUT

Mastercard
• Plans a contact-less card, where you can tap and pay• Will launch MasterCard inControl with cap on expenses• Offers zero-liability feature in which transactions made through PoS will be covered

Visa
• Offers zero-liability feature• Offers Visa Risk Manager -identifies transaction(s) that is not typical of a customer and blocks it• Working on a platform for utility bill payments

Wednesday, October 23, 2013

Both Visa and MasterCard offer this feature. RuPay cards by NPCI will also start offering this by the end of this year or early January,

With the rise in cases of online fraud, National Payments Corporation of India (NPCI) has decided to provide an insurance cover for such transactions.

NPCI will tie up with general insurance companies for this; it has
called for a Request For Proposal (RFP). This would cover both domestic
and international transactions, all those done by swiping a card,
PIN-based transactions on ATMs or points of sale and e-commerce
transactions with two-step authentication.

According to the Kaspersky Consumer Security Risks Survey, a global
study conducted by B2B International and Kaspersky Lab in the summer of
2013, about 41 per cent of users who lost their money as the result of
financial cyber-fraud failed to get a single cent returned to them. And,
only 45 per cent of users who suffered through online fraud were fully
compensated. In 17 per cent of cases the money disappeared during
e-banking sessions; 13 per cent of the victims were customers of online
stores.

“Technology is changing the fraud landscape and challenging the
boundaries of fraud risk management. The (earlier) frameworks to
mitigate simple frauds are no longer effective,” Rohit Mahajan, partner
and co-head, forensic services, at KPMG in India, had said while issuing
an India Fraud Survey last year.

The NPCI insurance cover will be over and above any policy taken by a
member-bank. The policy will cover compromised and disputed transactions
carried on the National Financial Switch (which facilitates inter-bank
ATM transactions) ATM Network. It will also cover disputed transactions
on the NFS Network. The RFP issued by NPCI is to identify and appoint
the general insurer for providing insurance cover for fraudulent
transactions that result in financial loss to the customers of NFS
members or sub-members; also for non-bank ATM operators.

“This is a good opportunity for the insurance community. We will be
interested in taking part in the bidding process, since it is a large
and prestigious contract,” said a senior official of a state-owned
general insurance company.

The overall insurance cover that will be provided will be Rs 10 crore
and the per-card cover will be Rs 50,000. The insurer (which wins the
bid) will have to settle claims within 30 days of claim submission by
NPCI. Further, the bidder will also have to honour the request from any
member-bank(s) for any additional cover sought, once the policy is
issued to NPCI and is in force. The premiums will be paid by NPCI.

To be eligible for the bid, an insurance company should have a minimum
of three years of operations in general insurance in India as on March
31. Also, a minimum gross direct premium income of Rs 250 crore for
2011-12 and 2012-13, respectively. The non-life insurer is also required
to have a minimum claim settlement ratio of 75 per cent in the past
three financial years and not be currently blacklisted by NPCI, any
government body or financial institution in India. All this would mean
only the large private general insurers and the four state-owned general
insurance companies will be eligible.

In case of a disputed transaction using a debit/credit card, it is the
customer's responsibility to prove he is not at fault. Till then, they
are liable to pay for the transaction. As a protection against this, one
can opt for credit or debit cards which have the zero-liability
feature. Both Visa and MasterCard offer this feature. RuPay cards by
NPCI will also start offering this by the end of this year or early
January, said an official.

Tuesday, September 17, 2013

The publication of RBR's global payment cards research provides,
among other things, an annual opportunity to analyze how the different
card schemes are matching up.
Last year's research highlighted the meteoric rise of UnionPay, and
in many ways this remains the outstanding feature again this year, with
the Chinese scheme growing its share of cards in issue to 34.5 percent —
well ahead of its main competitors.

To some extent all the main schemes will be pleased with the new
figures, however. Visa's V Pay, while still something of a niche
European scheme, grew its card base by more than 50 percent, for
example. And with an overall increase of more than 8 percent, MasterCard
brands saw slightly higher growth in card numbers than their Visa
counterparts.

The other main schemes — American Express, Diners Club, Discover and
JCB — also grew their cards in issue, but it was the 12 percent growth
in domestic scheme card numbers that caught the eye here. This only just
kept pace with the global growth driven by UnionPay but was
nevertheless ahead of most other schemes.

Growth of domestic schemes in less developed markets is likely to be a
feature of the global cards scene for the next few years, with Brazil's
ELO, India's RuPay and expanding schemes in other large markets such as
Mexico and Nigeria.

There is no right way of comparing schemes — while UnionPay now
dominates in terms of the number of cards, it must be remembered that
most of these are in one country and that UnionPay's share of the number
and value of transactions still lags behind the other main schemes.

Interestingly, while UnionPay makes up a more modest 4.4 percent of
transactions, this rises to 20.5 percent of the value of global card
payments. The message here is that it is only a matter of time before
there is an explosion in the number of global card transactions when
Chinese people start using cards for more everyday purchases.

Wednesday, May 1, 2013

Come July this year, the National Payments Corporation of India
(NPCI)'s RuPay debit card will go 'global' in a strategic tie-up with an
American card issuer, Discover Financial Services (DFS) which will
offer international acceptance of the card.

With this,
RuPay will emerge as an alternative of international payment gateways
like VISA or Mastercard and wants to make substantial difference in
payment landscape.

In an interview to Deccan Herald, NPCI
Managing Director & CEO A P Hota said both RuPay and the US firm DFS
would stand to gain from this partnership due to extended distribution
network of their respective cardholders. DFS is a banking and payments
services firm that competes with payment companies such as Visa and
MasterCard, even as it owns the card company Discover, Diners Club cards
and Pulse ATM networks.Unlike Visa and MasterCard, which partner
banks to enable them issue cards with similar features, Discover adopts a
philosophy of partnering local payment networks across the world, Hota
pointed out.

“Also, the RuPay Card is leveraging upon EMV
technology of Discover to issue global cards. Cards, terminal and host
specifications for the RuPay global cards have already been released to
the pilot-member banks. Issuance of RuPay global cards will commence in
July with two banks,” he said.

Further, Hota said NPCI has spent
over Rs 100 crore on RuPay card scheme infrastructure which is geared to
serve all customer segments, across payment channels and form factors.
RuPay, according to him, has clearly defined product roadmap keeping
both domestic as well as international needs of prospective customers
and banks.

Under the strategic alliance, Hota added, NPCI and
DFS have already announced operationalisation of acceptance of Discover
and Diners’ Club cards in India on NPCI’s NFS (National Financial
Switch) network. Accordingly, Discover and Diners Club cards now are
accepted at over 85,000 DFS ATMs across the country, NPCI chief said. In
the coming months, RuPay global cards will be issued and accepted on
the Discover, Diners Club International and PULSE networks for
international purchases and cash access outside India. This will be
followed by the acceptance of Discover and Diners Club cards access at
point-of-sale (PoS) terminals for purchases in the country.

NPCI
started its services providing cheaper access to third-party ATMs by
setting up a network with very low transaction charges coupled with
strong support from the Reserve Bank of India. Giving a macro
perspective, Botha said, so far 25 commercial banks, 25 regional rural
banks, and 30 urban co-operative banks have issued over 1.5 million
RuPay cards. From readiness perspective, all the ATMs in the country
are integrated with RuPay. On financial data, Hota said the project
was initially conceived by the RBI and was taken forward for
implementation by Indian Banks Association in March 2012.

"We
would be able to break-even in this project in five years from when we
commenced, which is by financial year 2017-18." NPCI Board is headed by
Infosys Technologies' emeritus chairman N R Narayanamurthy with
nominees drawn from RBI and 10 core promoter banks -- State Bank of
India, Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank,
ICICI Bank, HDFC Bank, Citibank, HSBC.